An Iranian Economist Covering Economic Affairs in Iran and in the Middle East.

Tuesday, January 17, 2012

Gold Rising Again in Tehran

Gold coins, known as Bahar Azadi, are again on the rise in Tehran. Their price has just passed 7'200'000 Rials! to give you a perspective that is more than what a government retiree receives in a month. The new rise has began almost immediately after government opposed increasing interest rates for banking deposits. As the volatility in market increases people are more desperate to find new means to save their hard earned savings. As banks are not offering compatible returns, the options are the traditional ones: gold, hard currency and real estate.
The constant increases in money supply in recent years amplify the effects of their despair. It seems there is a large amount of money in circulation, one might even call it the beast of liquidity. The beast is causing havoc in currency and gold markets as it runs wild. In the meantime middle class shopping power is declining rapidly. Mr. Asgar-Ouladi a prominent businessman who chairs Iran-China Chamber of Commerce predicted "In six month there will be severe shortage of food and other necessities in the country." Well no one hates a declining currency like an importer. How anyone could expect the consumers to remain calm hearing these prophecies?